Many investors are familiar with values-based investing which is a strategy that evaluates investments not only for potential profit and risk, but also for alignment with an investor’s core values. For example, an investor may be environmentally conscious and want to exclude fossil fuel companies from their stock, bond, or fund investments.
Biblically responsible investors want to own investments that follow God’s word within the Bible. They want to own investments that are making a positive impact in the world and create value rather than extracting value.
This was something that I hadn’t paid much attention to until last year, when I was reading a scripture verse in the book of Proverbs that really spoke to me:
” Be sure you know the condition of your flocks, give careful attention to your herds.”
-Proverbs 27:23 (NIV)
The writer of Proverbs was, of course, referring to flocks as the assets of his audience at the time, members of an agrarian society in Israel. However, the wisdom found in scripture is timeless and relevant for all generations. I felt the Holy Spirit convicting me that I needed to dig deeper into my own assets or investment portfolio to “know the condition” of my own assets. I own a portfolio of exchange-traded index funds, the same investments I recommend to my clients. However, I realized that these index funds contain investments in companies that did not agree with what I believed in as a Christian. They owned shares of companies that practiced predatory lending, companies that produced immoral products such as tobacco, alcohol, and pornography as well as companies that violated human rights and the sanctity of life. As an investor, I owned a share in these companies; I was a minority owner, of course, but still an owner. This troubled me enough to change my portfolio to index funds that not only screen out these companies, but also embrace companies that create value in the world. I also wanted fund companies that engage directly with the boards of the companies they invest in to further make a difference in the world. This is what biblically responsible investing looks like: exclude the “sin stocks,” embrace the companies that create value and impact in the world and hold the stewards of the funds (the fund managers) accountable to promote positive change in the world.
A common misconception that investors have about values-based investing is that it provides sub-par investment returns when compared to a portfolio that does not screen for values. This misconception is also a common one I hear when it comes to biblically responsible investing. However, the Biblically Responsible Investing Institute (BRII) conducted a study in 2020 to examine this question. They carefully assessed the impact of screening the S&P 500 from 1/1/2000-12/31/2019. They found that the annualized returns of a biblically responsible screened portfolio were 6.19% per year on average. The annualized return for the S&P 500 over that same period? The same 6.19% per year on average*. While BRI screening resulted in a slight disadvantage in some periods and a slight advantage in others vs. the S&P 500 index, the screened portfolio matched the return of the S&P 500 index in the long run. Past performance, of course, is no guarantee of future results.
Of course, this is not saying that every Christian should invest only in biblically responsible investments. For many, it may not be feasible to do. Many investors have all their investments inside of mutual funds within their employer retirement plans such as 401(k)’s and 403(b)’s. They may only allow certain funds on the platform. However, if this is your situation, and you feel that you would want to be able to invest according to your values, you can see if you have a brokerage window within your plan that will allow you to purchase mutual funds or ETF’s that invest in line with your values. If this is not available, you can also ask your plan administrator to add biblically responsible investments to your available funds list.
If this is a topic that you would like to discuss further, please schedule a free, no obligation, call using the link below. I am happy to talk with you further about this and help you with implementing it if it is important to you:
*Source: BRII, Bloomberg, see https://www.briinstitute.com/backtest.pdf for detail of the screening